MPs up in arms over exorbitant interest charges

By Patrick Kisembo

16th February 2011

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Kigoma North (Chadema) lawmaker Zitto Kabwe

Members of parliament yesterday called on the Ministry of Finance and Economic Affairs to involve the House in its dialogue with banks and other financial institutions to ensure they reduce borrowing interest rates.

The first to come up with the proposal was Kigoma North (Chadema) lawmaker Zitto Kabwe who, in his supplementary question, wanted deputy minister Pereila Ame Silima to tell the House if it was possible for Parliament to be involved in dialogue with banks and other financial institutions because the interest rates they are charging are extremely high.

Kabwe said the risks which the minister had referred to were not plausible because borrowers, before getting loans, have to submit valid reports to the banks and other financial institutions.

Before the minister's response, Speaker Anne Makinda cautioned on whether Parliament could be involved in such a matter.

The deputy minister, in response, said the government was working on the matter. He however welcomed the idea of MPs to collaborate with the government to negotiate with banks to ensure interest rates are low.

However, when responding to the basic question by Temeke MP Abbas Mtemvu, the Deputy Minister said following the 1991 financial sector reforms the government stopped setting interest rates for banks and allowed such rates to be ruled by market forces.

Silima said in improving the financial sector, including cutting interest rates, the government was implementing a second generation of financial sector reforms.

He said under the reform, strategies have been devised to control various challenges facing the sector.

“The government, in collaboration with the Bank of Tanzania, has continued taking various measures including putting in place fiscal and monetary policies in reducing inflation, which is the major factor in determining interest rates," he said.